Fitch: Stable Outlook for U.S. Life Insurers in 2014

CHICAGO--()--The rating outlook for the U.S. life insurance industry is stable for 2014, according to Fitch Ratings. In addition, the fundamental sector outlook is stable. Fitch's outlook considers the industry's strong balance sheet fundamentals and liability profile, and improved operating performance.

These positive factors have somewhat mitigated Fitch's ongoing concerns over the challenging macroeconomic environment that continues to pressure operating fundamentals. While Fitch believes the industry is well positioned to withstand macroeconomic challenges over 2014, the outlook is vulnerable to severe, albeit unexpected shocks to the economy.

Reported statutory capitalization exceeds both pre-crisis levels and rating expectations, driven by retained earnings and other capital management initiatives. Fitch views the industry's liquidity profile at the operating company level as strong, driven by improved investment valuations and capital market liquidity. Moreover, insurance holding company liquidity remains very strong relative to historical levels and rating expectations.

Better than expected earnings performance in 2013 benefited from improved financial markets, namely favorable equity market performance and relatively benign credit market conditions. The earnings impact associated with the uptick in interest rates in 2013 was fairly limited. Fitch expects modest earnings improvement in 2014 under our base case scenario.

While the uptick in interest rates in 2013 has provided some relief, Fitch expects historically low interest rates will continue to pressure industry operating and balance sheet fundamentals, and cause life insurers to further rationalize their participation in interest-sensitive insurance product lines in 2014.

The full '2014 Outlook: U.S. Life Insurance' is available at 'www.fitchratings.com' or by clicking the link below.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: 2014 Outlook: U.S. Life Insurance (Improved Credit Fundamentals)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=727209

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Contacts

Fitch Ratings
Douglas L. Meyer, CFA, +1-312-368-2061
Managing Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Julie A. Burke, CFA, CPA, +1-312-368-3158
Managing Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Douglas L. Meyer, CFA, +1-312-368-2061
Managing Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Julie A. Burke, CFA, CPA, +1-312-368-3158
Managing Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com